If you are a veteran or active duty military personnel, you may be eligible for a VA mortgage loan. And if you are, you don’t want to miss out!
A VA mortgage can be the answer to financing your dream home. Read on to learn all about how to apply for a VA mortgage loan in Texas - and why a VA home loan is the way to go.
What is a VA mortgage?
A VA mortgage is a home loan that is guaranteed by the Department of Veterans Affairs. This means that if you default on your mortgage payments, the government will step in and help repay the lender.
The VA is responsible for administering an array of “veterans affairs” benefit programs. These include pension, education, disability compensation, home loans, life insurance, vocational rehabilitation, survivor support, medical care, and burial benefits.
Because VA home loans are federally backed, the terms and rates are often more attractive. For example, FHA loans are a type of federally-backed loan that are popular with first-time homebuyers for similar reasons.
What are the credit and income requirements for a VA mortgage?
The credit requirements for a VA mortgage are generally more lenient than other types of home loans. For example, you may be able to qualify with a lower credit score. The income requirements vary depending on the lender, but you will typically need to show proof of stable income.
What are the benefits of a VA mortgage?
There are many benefits to a VA mortgage versus a conventional loan:
No down payment
Most home loans require at least a small down payment to buy a home. Even FHA loans, which have much lower requirements, still involve some type of down payment. However, the VA home loan is an exception.
Instead of paying anywhere from 5 to 20 percent (or more!) of your new home’s purchase price, when you take out a VA home loan you can finance up to 100% of the purchase price. Thus, a VA home loan is a true “no-money-down” opportunity for you to secure a home mortgage.
No private mortgage insurance for VA loans
Lenders usually require you to pay for mortgage insurance if your down payment is anything less than 20 percent of the home’s purchase price.
This is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan. It is meant to protect the lender in the case of a default on your loan.
However, VA loans do not require either a down payment or mortgage insurance. And since private mortgage insurance typically costs 0.5 to 1 percent of your loan amount per year, that adds up. Therefore, VA-backed mortgages are shockingly affordable both upfront and long-term.
VA loans come with a government guarantee
You may be thinking that a VA home loan sounds too good to be true. But it is! There’s a reason for that, though. VA loans come with such favorable terms because they’re backed by the federal government.
That means that a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments. While this won’t impact you (for better or worse), it makes you a less risky borrower, which is appealing to mortgage lenders.
Thus, the government contract enables private lenders to offer VA loans with exceptionally attractive terms. And you are the one who benefits!
You can shop around for the best VA loan rates
One common misconception is that VA loans are originated or funded by the VA - that assumption is false. These mortgages are not direct loans from the government, and mortgage rates for VA loans are not set by the VA.
Instead, like other home mortgage loans, VA loans are offered by private lenders: U.S. banks, savings-and-loans institutions, credit unions, and mortgage lenders. Each of these institutions can set its own VA loan rates and fees.
Therefore, you can shop around and compare loan offers from different VA-approved lenders. And then choose the loan that works best for your budget.
VA loans don’t have a prepayment penalty
Another benefit of a VA loan is that there's nothing to stop you from paying off or selling your home before the end of your loan term.
There is no prepayment penalty or early-exit fee. This is true no matter what time frame you decide to sell your home within.
There are no refinance restrictions
As home values continue to rise, many people are interested in refinancing options. Luckily, you can refinance your existing VA loan into another VA loan via the agency’s Interest Rate Reduction Refinance Loan (IRRRL) program.
A variety of housing options
A VA home loan, like other mortgage types, can have a fixed rate or an adjustable rate. But unlike some other more restrictive mortgage terms, you can use a VA loan to buy a single-family house, condo, duplex, manufactured home, or a variety of other property types.
Additionally, a VA loan can be used for refinancing your existing mortgage or making necessary repairs or improvements to your home such as making your home more energy-efficient.
It’s easier to qualify for a VA loan
Like all mortgage types, VA loans require specific documentation, an acceptable credit history, and sufficient income to indicate you can make your monthly payments. For a conventional loan, the private lender can set additional requirements and stringencies.
However, compared to other loan programs, VA loan guidelines are more flexible. Again, this is due to the VA loan guarantee, backed by the government.
Because the Department of Veterans Affairs wants to make the loan process easier for military members, service members, veterans, and qualifying military spouses to buy or refinance a home, they provide better terms.
VA home loan closing costs are lower
Mortgage closing costs typically run from 2 to 5 percent of the loan cost and are an important part of the home loan process. They include property taxes, private mortgage insurance, and more. However, the VA limits the closing costs lenders can charge to VA loan applicants.
This is yet another way that a VA loan can be more affordable than other types of loans. Even 2 percent can add up - on a $200,000 home loan that’s $4000 saved! You can use those savings for moving costs, home repairs, or new furniture. It’s up to you!
The VA offers flexibility with the funding fee
While VA loans limit closing costs, they do require a “funding fee.” This is an upfront cost based on the loan amount, the borrower’s type of eligible service, down payment size, and other factors.
However, funding fees don’t need to be paid in cash. The VA allows the fee to be financed along with the loan, so nothing is due at closing.
Additionally, not all VA borrowers will even pay it. VA funding fees are waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
VA loans are assumable
Most VA loans are “assumable,” which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible.
Assumable loans can be a huge benefit when you sell your home, especially as mortgage rates are expected to continue to rise.
If your home loan has a low rate now while market rates rise in the future, the assumption features of your VA become even more valuable. And all signs point to rising mortgage rates!
What are the cons of a VA mortgage?
There are few downsides to a VA mortgage, however, some exist.
For example, with no down payment requirement, it may take longer to build equity in your home. However, if the property you’re purchasing is in a rising market (which is likely if you’re buying a home in Texas!), that’s likely only a temporary problem.
One of the biggest limits of VA loans is that they can only be used to purchase or refinance owner-occupied properties. Thus if you want to purchase a second home for vacation or investment, you would need to use conventional financing.
We’ve already mentioned the VA funding fee, which can be a downside for some. Additionally, one of the disadvantages of the VA funding fee is that it’s higher for subsequent use.
Lastly, not all lenders understand or offer VA loans. That’s why it is so important to find an experienced local Texas lender like Texas United Mortgage who will know how to get you the best rate and terms for your VA home loan.
How do I qualify for a VA mortgage?
To qualify for a VA mortgage loan, you must meet (one of) the following requirements:
- Active duty service member
- Member of the National Guard
- Surviving spouse of veteran
- Cadet at the U.S. Military, Air Force or Coast Guard Academy
- Midshipman at the U.S. Naval Academy
- Officer at the National Oceanic & Atmospheric Administration
Additionally, you must meet (one of) the following requirements:
- You must have served at least 90 days of active duty during wartime or 181 days of active duty during peacetime.
- You must have been honorably discharged from the military.
- You must have a satisfactory credit history.
- You must be a U.S. citizen or permanent resident alien.
- You must occupy the home as your primary residence.
- You must have served six years in the Reserves or National Guard
- Your spouse was killed in the line of duty and you have not remarried
How to apply for a VA loan Certificate of Eligibility
In order to apply for a VA loan you will need to obtain a Certificate of Eligibility (COE). The COE verifies to the lender that you are eligible for a VA-backed loan. It also shows how much entitlement you have available to guarantee the loan.
You can apply for your COE online, through your lender, or at a regional Loan Center. If you’re unable to obtain your COE online, you can fill out a form and submit it by mail or fax.
Does a COE guarantee you a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval. What it does is shows the lender that you are eligible for a VA loan. However, no one is guaranteed VA loan approval.
For approval, you still must qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits is based on your military status or affiliation. However, it doesn’t necessarily mean you’ll qualify for a VA loan.
You still have to qualify for a VA mortgage based on your credit, debt, and income. Luckily, VA loan terms make this process much simpler. For example, you won’t need to come up with a down payment, so you can use funds to pay down other debt if necessary.
The VA also offers additional support to disabled veterans to help make home buying possible.
Texas mortgage loan requirements
In addition to the above-mentioned VA mortgage loan requirements, you must also meet the following Texas mortgage loan requirements:
- You must have a valid Social Security number
- You must have sufficient income to repay the loan
Additionally, there are some specific VA mortgage rules that apply in Texas. For example, the maximum loan amount that you can qualify for depends on the county in which the property is located.
How do I apply for a VA mortgage loan in Texas?
To apply for a Texas VA loan, you will need to submit a loan application and supporting documentation to a lender. The lender will then review your application and determine whether or not you qualify for the loan.
Make sure you select a lender that is familiar with VA loans as this will make the whole process smoother. You should also find a local mortgage lender who will understand the nuances of Texas mortgage rules, especially those that pertain to veterans and active service military members.
What is a Texas Vet Loan?
The Texas Veteran Land Board (VLB) program, commonly known as the “Texas Vet Loan,” is a VA-backed loan that is available to eligible veterans, service members, and their surviving spouses in Texas. The loan can be used to purchase a home or refinance an existing mortgage.
The Texas Vet Loan offers excellent rates and follows similar guidelines as a VA Loan. The program also offers an interest rate reduction for disabled Veterans who have a 30% or greater VA disability rating.
Therefore, in most cases, this loan program will be the best option for military personnel and Vets buying a home in Texas. Our experienced Texas mortgage team can help you determine which veteran mortgage program is best for your specific situation.
How do I find a mortgage broker for a VA mortgage loan?
Active service members and veterans should find a mortgage broker who understand their individual housing needs. Your local Veterans Affairs office may have referrals for VA-approved lenders, or you can search online. You can also ask fellow service members or vets for referrals.
If I’ve applied for a VA loan before can I do it again?
Yes, if you’ve previously applied for and received a VA loan, you can apply again. Generally speaking, there is no maximum or limit on how many times you can use a VA loan.
You can use a VA loan once, twice, three times or seven. As long as you have remaining entitlement, you typically always have the option to obtain another VA loan.
What are the VA mortgage loan limits?
The maximum loan amount that you can qualify for depends on the county in which the property is located. For a single-family residence in a typical U.S. county, the limit in 2022 is $647,200.
That's the maximum a VA loan borrower subject to the limit can finance for no money down.
Additionally, the Blue Water Navy Vietnam Veterans Act of 2019 eliminated VA loan limits, as of 2020, for veterans and service members with full entitlement to VA loans.
The law, which also increased the VA funding fee, provides disability benefits for more veterans exposed to Agent Orange during the Vietnam War.
When preparing to apply for a VA mortgage, you will need to gather your financial documentation, including tax returns, pay stubs, and bank statements. You should also check your credit report and score to see if any issues need to be addressed.
The first step to actually apply will be to fin a VA-approved lender to work with. They can help you obtain your COE, or you can get started on that while you search for a lender. Once you have a lender, they will get you pre-qualified for a loan amount, so you know what your house hunting budget is. Select a VA-approved Lender.
Qualifying for a VA loan with part-time income
Yet another benefit of a VA home loan is that you can qualify for financing even if you have a part-time job or multiple jobs instead of one full-time position.
In order to qualify under such circumstances, you will need to show a 2-year history of making consistent part-time income, with stability in the number of hours worked. A good lender will help make sure any income you received appears stable.
How to get the best deal on a VA mortgage
To get the best deal on a VA mortgage, it’s important to shop around and compare rates from multiple lenders. It’s also a good idea to get pre-approved for a loan before you start shopping for a home.
Not all lenders are the same. Make sure you ask any potential lender if they are VA-approved and how frequently they work with these types of loans. It’s important to find a lender who is experienced and up to date on all laws and regulations around these loans. The better they know the new rules, the better deal you will end up with.
Tips and takeaways for applying for a VA mortgage home loan in Texas
Ready to get started? Let’s recap!
- Make sure you meet the eligibility requirements for a VA mortgage loan.
- Gather your financial documentation before applying for a loan.
- Check your credit report and score to see if any issues need to be addressed.
- Shop around and compare rates from multiple lenders before choosing one.
- Get pre-approved for a loan before you start shopping for a home.
Follow these tips and takeaways when applying for a VA mortgage loan in Texas and you will increase your chances of getting approved and finding the home of your dreams. Applying for a VA mortgage loan can be tricky, but the benefits of this type of loan make it well worth the effort.